What term identifies the possibility that a particular property or person may suffer loss from a specific peril?

What term identifies the possibility that a particular property or person may suffer loss from a specific peril?

• A. Hazard
• B. Loss exposure
• C. Risk
• D. Peril

Answer: (B)

Loss exposure is the potential for loss to occur to a defined property or person from a specific peril. It focuses on the asset’s vulnerability to a particular event, i.e., what could be lost and from which cause. In the example of a building facing flood, the loss exposure identifies how much loss could result from that flood peril. A hazard is a condition that increases the likelihood or severity of loss, not the loss itself. A peril is the actual event that causes the loss (the flood, fire, etc.). Risk combines the likelihood and the magnitude of loss, but the phrase in the question points to the asset’s potential loss from a specific cause, which is loss exposure.

Loss exposure is the potential for loss to occur to a defined property or person from a specific peril. It focuses on the asset’s vulnerability to a particular event, i.e., what could be lost and from which cause. In the example of a building facing flood, the loss exposure identifies how much loss could result from that flood peril.

A hazard is a condition that increases the likelihood or severity of loss, not the loss itself. A peril is the actual event that causes the loss (the flood, fire, etc.). Risk combines the likelihood and the magnitude of loss, but the phrase in the question points to the asset’s potential loss from a specific cause, which is loss exposure.